This monthly newsletter provides updates on Ohio’s ongoing utility corruption scandal and is a joint project of Eye on Ohio, the nonprofit, nonpartisan Ohio Center for Journalism, and the nonprofit Energy News Network.

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New developments in the saga surrounding House Bill 6, Ohio’s nuclear and coal bailout law, include:

  • Fact-finding efforts continue to face frustrations in regulatory and court cases.
  • FirstEnergy cites the Eighth Amendment’s bar against excessive fines in arguing against penalties for thwarting auditors.
  • One judge has given a preliminary thumbs up to a settlement for several FirstEnergy shareholder derivative suits, but for now will wait for other judges to rule in their own cases.
  • Ohio’s corruption scandal casts new light on a pre-HB 6 deal that paid millions to demolish and clean up a former coal plant site.

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Irrelevant?

FirstEnergy provided the Office of the Ohio Consumers’ Counsel with various documents it had previously produced in shareholder litigation. Yet the company continues to fight against other disclosures in regulatory cases related to the House Bill 6 scandal.

Among other things, FirstEnergy wants the Public Utilities Commission of Ohio to block the OCC from requiring Bob Mattiuz, a vice president for compliance and regulated services, to bring documents on corporate and charitable contributions to his deposition. Depositions let lawyers question a witness under oath.

FirstEnergy argued that the document requests were untimely under a prior deadline. The company also asserted that the request is “irrelevant” and “unrelated to the [utilities’] compliance under Ohio corporate separation law.”

The May 9 filing is bold in light of audit findings that certain ratepayer charges were improperly tracked. That conduct could have let FirstEnergy use ratepayers’ money for political purposes or to subsidize affiliates’ activities. Those actions would arguably violate Ohio’s corporate separation law.

The filing also shows FirstEnergy trying to take maximum advantage of the PUCO’s piecemeal approach to HB 6 issues, versus a comprehensive investigation. The PUCO has also been implicated in the corruption scandal as a result of FirstEnergy’s admission about payments to former PUCO Chair Sam Randazzo, who played a role in setting up the piecemeal approach before his resignation in November 2020.

Read more:

Excessive fines?

FirstEnergy filings also ask the PUCO to reject requests by OCC and the Ohio Manufacturers’ Energy Group for up to $1.4 billion in restitution and penalties for FirstEnergy’s failure to track the rider funds after they went into a money pool. Among other things, the company argues that statutory penalties of up to $10,000 per day might be improper under the U.S. Constitution’s Eighth Amendment, which forbids excessive bail, excessive fines and “cruel and unusual” punishments.

FirstEnergy asserts there was no violation of the PUCO’s order setting up the rider and contends that reimbursement is forbidden. However, the penalty request focuses on FirstEnergy’s alleged wrongdoing for not tracking rider money, versus the rider itself. So, the penalty demands are arguably distinct from the reimbursement claim that the Ohio Supreme Court denied when it ruled the rider unlawful in 2019, just before HB 6 became law.

FirstEnergy also claims that the penalty demand ignores benefits from a $300 million settlement in an excess profits case. That case dealt with calculations of significantly excessive earnings, and the settlement came after an Ohio Supreme Court ruling that the PUCO erred in excluding the rider money from earnings test calculations. Parties reached the settlement before audits from FERC and Daymark showed that FirstEnergy’s practices had obscured how the rider money was ultimately used.

The PUCO has yet to rule on the penalty issue. An adverse ruling might eventually go before the Ohio Supreme Court.

Read more:

Seeking info from FERC

OCC and others also are asking the Federal Energy Regulatory Commission to share documents and information from its ongoing cases on FirstEnergy. That includes a complete set of documents involved in a recent audit, versus the smaller subset that the PUCO has told FirstEnergy to provide.

“FirstEnergy has an over-reaching approach of claiming confidentiality of information that is not confidential (but is merely information that FirstEnergy seemingly prefers for Ohioans to not know about regarding its conduct),” said OCC’s April 28 filing.  

Earlier this spring FirstEnergy opposed participation in the FERC case by both OCC and the New Jersey Division of Rate Counsel. FERC has yet to rule on the state consumer advocates’ intervention and document requests.

Settlements still up in the air

U.S. District Court Judge Algenon Marbley gave a preliminary thumbs up to a deal to settle shareholder derivative claims. But he did not stay proceedings in other courts with similar cases that would be settled by the deal announced last winter. U.S. District Court Judge John Adams, who presides in one of those other cases, has said he wants more fact finding, called discovery, to move ahead before he okays the deal.

That discovery includes multiple depositions of current and former FirstEnergy executives under oath. But parties have haggled over scheduling. Among other things, FirstEnergy CEO Steven Strah’s questioning was postponed to an unknown date after company lawyers objected that he would be vacationing in Cape Cod in late May.

Meanwhile, former FirstEnergy vice president Michael Dowling, a defendant in multiple cases, has subpoenaed documents from Partners for Progress. That dark money group, led by FirstEnergy’s former lobbyist and others, gave $1.2 million in 2017 to two other dark money groups in the HB 6 scandal, Generation Now and the Coalition for Growth & Opportunity.

FirstEnergy lawyers have identified Dowling and former CEO Chuck Jones as having authorized various payments. Although Dowling’s legal strategy isn’t known, the subpoena might be an effort to support an argument that others misused funds for a bribe, versus dark money donations that fit within legal loopholes under election law.

The shareholder derivative cases would not pay money directly to shareholders, because their purpose is to protect the corporation from wrongdoing by directors and officers.  So, the settlement would provide FirstEnergy with roughly $180,000 million, primarily from insurers, after deducting fees for plaintiffs’ lawyers, whose clients sued on behalf of the company. Separate cases deal with shareholder claims for lost stock value or other damages.

Read more:

Political ripples

The Ohio Democratic Party also wants more detail about what involvement, if any, Gov. Mike DeWine had in the HB 6 scandal. Public records obtained by the group include copies of DeWine’s calendars from 2019 onward. 

However, widespread redactions and broad privilege claims make it hard to determine whom DeWine met and spoke with on many occasions, the group alleges. Materials produced so far also have a gap from June 16, 2020, until May 2021. That covers the period when Householder was arrested, Randazzo resigned and current PUCO Chair Jenifer French was appointed. 

On May 5 the group asked the Franklin County Court of Common Pleas to order more disclosures. The court has not taken any action yet.

Renewed

The PUCO earlier this month approved Energy Harbor’s request to continue operating as a competitive retail energy supplier with no mention of the company’s role in the ongoing HB 6 corruption scandal. Energy Harbor is the successor to FirstEnergy Solutions following its bankruptcy case, where filings first showed a payment to Generation Now in 2019.

Energy Harbor’s initial renewal application on April 4 noted the bankruptcy case but failed to mention any of the HB 6-related cases in which it is a defendant, or the ongoing federal investigation. The company added detail about several cases after an April 6 tweet by Dave Anderson of the Energy and Policy Institute noted the omission. The PUCO’s approval came three weeks later, with no opinion and no comments in the file from staff.

“The whole thing seemed odd,” Anderson said. “Here was seemingly an opportunity for the PUCO to do a deeper investigation of this former affiliate company.” 

The case raises the question of what substantive review, if any, the PUCO conducts and how, if at all, alleged corruption issues matter when it comes to approving retail electricity providers.

Cleaning up

FirstEnergy’s ongoing corruption scandal has cast new light on a deal that relieved the company of more than $12 million in cleanup costs for a former coal plant. JobsOhio forgave the loan after FirstEnergy completed its work at the site ahead of a Dec. 2017 deadline. JobsOhio’s plan is for PTTGC America to build a petrochemical cracker at the Belmont County site, although the company has not yet made a final commitment.

FirstEnergy transferred the property to PTTGC America, said FirstEnergy spokesperson Mark Durbin. Meanwhile, JobsOhio has spent $70 million on the site, $20 million of which was reimbursed by PTTGC, said JobsOhio spokesperson Matt Englehart.

That work “included demolition of the power plant, environmental remediation, draining and filling of ponds that were created by a former sand and gravel quarry, and grading and leveling the site,” Englehart said. He did not say who negotiated the deal for FirstEnergy, noting that all project discussions are deemed confidential.

JobsOhio is a statutorily created corporation that works with the Department of Development to attract businesses and jobs. It is exempt from Ohio’s public records law. Funding comes from Ohio Liquor revenues.

“The plant demolition was quite public, is very old news, and cleaned up a site of a dirty former coal plant to make it more attractive to investment to bring jobs to the people of Ohio,” Englehart said.

The deal matters because it relieved FirstEnergy of environmental liabilities the company otherwise would have had to pay. Plus, the structure of the deal shielded discussions by the company, JobsOhio and other involved parties from public scrutiny.

The environmental cleanup deal also meant FirstEnergy was arguably more flush with cash around the time that it and its affiliates began funding the alleged HB 6 scheme.

Read more: Before bribery scandal, JobsOhio forgave a $12M loan to FirstEnergy to clean up a coal plant (Ohio Capital Journal)

Kathi is the author of 25 books and more than 600 articles, and writes often on science and policy issues. In addition to her journalism career, Kathi is an alumna of Harvard Law School and has spent 15 years practicing law. She is a member of the Society of Environmental Journalists and the National Association of Science Writers. Kathi covers the state of Ohio.